Democracy Briefing: Who really wins from compulsory KiwiSaver?

Some policies arrive wrapped in so much praise that criticising them feels almost rude. National’s compulsory KiwiSaver package is one of those. Babies, mothers, retirees, a bigger nest egg for everyone, a sober conference under the slogan “Building the Future.” Seventy-one per cent of voters told the Post’s pollster they liked the idea of compulsory KiwiSaver before they had even seen the detail.

When something this big attracts that little resistance, the agreement itself is worth a second look. Not because the policy is necessarily wrong; it might be one of the better things this Government does. But a change that would eventually move a combined 12% of most employees’ pay into KiwiSaver or equivalent retirement schemes, by law, in perpetuity, deserves more than a warm round of applause. It deserves scrutiny. More than it is getting.

The party that killed compulsion learns to love it

Consider the messenger. This is the party of the Dancing Cossacks, the 1975 advertising campaign that helped bury Labour’s compulsory super scheme and define National’s instincts for half a century. National opposed Winston Peters’ compulsory savings referendum in 1997. It disliked KiwiSaver when Michael Cullen built it in 2006, then spent its years in office chipping away at it, halving the government contribution, scrapping the $1,000 kickstart, lowering minimum contribution settings. The commentator David Chaplin reckons National “probably did more long-term damage to KiwiSaver” than anyone.

And now the same party wants to make it compulsory, auto-enrol every newborn with a $1,500 “Baby Boost,” and push contributions to 6% each from workers and employers by 2032.

You could call that hypocrisy. Plenty have. I think the more interesting reading is the one Luke Malpass offered in the Post, where he reached for the parallel of “Nixon goes to China”. A compulsory savings scheme, he argued, “probably required the main party on the conservative side of politics to be on board.” There is something to that. Labour built KiwiSaver, and later flirted with compulsion in opposition, but never implemented it in government. If the Greens had proposed forcing people to hand over a chunk of every pay packet, Act would have called it economic coercion. Coming from National, the same idea gets dressed up as responsibility, resilience and common sense.

Clever politics, certainly. And maybe good policy too. We don’t save enough as a country, our capital markets are thin, and there are genuinely good things buried in the package, like the contributions for over-65s and for parents on paid leave. Credit where it is due.

A circuit-breaker dressed as a conversion

Why now? National did not wake up one morning converted to the wisdom of compulsion. It is sitting in the low-to-mid twenties in the polls and, on Richard Harman’s reckoning in Politik, would lose around eleven seats if an election were held today. The KiwiSaver announcement, he wrote, “has to be seen as an attempt at a circuit breaker.”

Chris Trotter, writing in LawNews, heard something sharper still: “the unmistakable note of panic.” He compared it to David Shearer unveiling KiwiBuild to a Labour conference in 2013, another flagship policy launched by a leader trapped in a political cul-de-sac and hoping for rescue.

None of this means the policy is bad. A government can do the right thing for self-interested reasons. But it does puncture the story National is telling about itself, which is one of long-term stewardship and serious leadership thinking in generations rather than electoral cycles. The truth is more ordinary. A party worried about where the polls are heading has reached for a popular policy that was already sitting in a rival’s manifesto.

KiwiSaver is now a proxy debate about NZ Super

National insists that KiwiSaver and Superannuation are “two separate conversations.” Politically, they are nothing of the sort. Nicola Willis has been unusually candid about the fiscal weight of NZ Super, and about her doubts that the country can keep funding a universal pension at 65 while also requiring people to save privately. Asked whether you could really do both, she suggested the answer “probably needs to be a more subtle combination of the two.” Note the word: “combination”.

The investment manager Rupert Carlyon, of Kōura Wealth, said the quiet bit plainly. Compulsion, he argued, “surely means the end of universal NZ Super. You don’t need them both.” Newsroom’s Tim Murphy framed the whole package as National giving with one hand while clearing its throat to take away with the other. Even David Farrar, cheering the policy on his blog, let the logic slip out: a country where everyone has private savings is a country where public superannuation can be set “at a more affordable level at some future stage.”

What voters are not being invited to dwell on is what comes after. Compulsory KiwiSaver makes it politically easier, somewhere down the track, to raise the age of eligibility for Super or to means-test it. You soften people up by telling them they are all building private wealth, and then the universal pension starts to look like a luxury we can trim. The shift is from a collective promise, the same pension for everyone at 65, to an individual arrangement where the balance in your account is your own affair. Carlyon again, bluntly: these changes are “a very clear statement that retirement is now our own personal problem.”

Whether you think that shift is sensible or alarming probably depends on your politics. What should worry everyone is that it is being engineered quietly, through a popular savings policy, rather than argued for honestly. Tim Hunter put it sharply in the NBR: without an endgame on Super, “forcing a couple of million people to save more than they want to is the ultimate nanny state intervention.” The policy only makes full sense as “stage one” of something bigger. The politicians selling it should say so.

The paywall now starts at halfway through all Democracy Project newsletters. Please take out a paid sub if you want to support this service and access the full content, including the following sections: “Compulsory saving, compulsory fees”, “A pay cut for the people least able to absorb it”, “From pension scheme to whole-of-life account”, and “The questions the applause is drowning out”.